Bitcoin Traders In Prison as Silk Road Founder Pleads “Not Guilty”
US legal eagles seeking the scalps of high-profile abusers of the controversial virtual currency Bitcoin have bagged their first two. And another one might be on its way.
Charlie Shrem, the former vice chairman of the Bitcoin Foundation Inc., has been sentenced to two years in jail. He pleaded guilty to money laundering via Silk Road, the unlawful online marketplace said to have generated US$1bn-plus in revenue.
Although Bitcoin Foundation Inc. was founded in 2012 to standardize the cryptographic coin, Shrem got caught helping Robert Faiella, a Bitcoin trader, with illegal transactions. He and Faiella pleaded guilty to several charges in September. Faiella got a four-year prison sentence.
As reported in TechMutiny Issue No.5, FBI investigations disclosed Silk Road was being used for selling drugs and other illegal transactions. It was shut down in 2013.
While Bitcoin has fired the international tech community’s imagination for enabling users to carry out online banking anonymously, the FBI says Silk Road abused the digital currency for crime and threatened to give e-commerce a bad name.
It is now its operator Ross William Ulbricht who is in the dock. He is accused of owning and using Silk Road for money laundering, drug trafficking, computer hacking and even hiring an assassin to commit murder. He was arrested in October 2013 but insists he is innocent.
His case went to trial at a Manhattan federal court this month (January). If found guilty, he faces a lifetime in prison.
Legally, the Ulbricht lawsuit should test claims that operators of online networks such as Silk Road and Internet service providers should not be held responsible for the illegal activities of its users.
Technologically, tech developers and hackers will reportedly be following the case closely to learn how the FBI infiltrated Tor, the anonymity network Silk Road uses. The Tor (The Onion Router) servers are constructed so that it is impossible to trace any traffic on the websites linked to them. But it might have flaws that US law enforcers were able to exploit.
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